Mind the Wage Gap Please

With all the craziness in the economy and (justified) outrage at CEO and financial sector compensation packages, I’ve been thinking about income distribution and the wage gap – and how it relates to younger professionals who are used to working in a faster leaner environment.

Most people look at CEO and higher up executive compensation packages see an amazing gap between what they make and what a lower manager or line worker makes. Even at a salary of say $400,000 (which is under what the government is proposing capping bailed out CEO salaray at) breaks down to a hearty $7,692 per week. Not a bad gig.

Listen, I’m not saying the government has a right to tell people what they have the ability to earn in business. That’s crazy. BUT I think if you’re taking tax payer dollars to bail out a company that YOU helped run into the ground, a wage ceiling is not out of the question. More importantly, do shareholders think about the ‘value’ of their CEO vs. their compensation in their investment decisions?

But let me get back to the big What IF. Do we as a society (not a corporate board) think that upper management and CEOs are worth hundreds (or thousands) of times the wage of a lower level worker? Are they doing that much more difficult work? Do they have hundreds of times more expertise? Certainly, I would hope that its much more, but does the wage gap match the skillset?

The argument is that large paychecks attract the best qualified candidates. I think that may be valid. What I want to know is if you get more bang for your buck by getting a kick ass CEO and upper management block that is super expensive but have to pay your front line workers less than they’re worth – OR if you settled for a middle of the road upper management block and paid lower line workers more? I don’t have the answer to that question but I am curious about it.

I also wonder if a corporation could change its structure to the latter, where transparency reigns, and the income gap between the highest paid employee and lowest is much smaller, what would that do for your business? Would it attract the best lower and middle management talent? How much would your upper management talant pool be affected? Would it attract the best front line talent? Would it give people more of a sense of ‘team’ or ownership? And would it be a great story that you can market? I think that altruism is an incredibly marketable thing, so long as its genuine.

Anyone know of any companies that are currently doing this or that have narrowed this gap? Has it hurt them or helped them? And as workers value things like time and flexibility more than wage, how will this change the talent pool and corporate structure of companies in the future?

3 Comments

I know Ben a Jerry’s had a rule awhile back that no CEO of theirs could earn more than 8 times that of the lowest paid employee. They had a really, really hard time attracting a good CEO- but that’s not to say some kind of more reasonable cap couldn’t work.

Whole food currently caps it at 14 times the average “wage earning” employee compensation, but they get around that a bit by offering top managers stock options and nice pension packages to boot. That still seems quite prudent since the average “Big Corporate” CEO earns about 400 times that of a the average US worker.

My other thought is that if you are a shareholder, and you are outraged by the CEO’s compensation, sell your stock. If you are not a shareholder (and if this is not a “bale out company”)then why do you care? It’s not your money.

First of all, the transparency issue is one that is at the heart of unions, which recognize the absurdity of compensation declaring that one persons work is truly 5000 times better or more important than another. Many of the logical aspects of unions are cast aside because unfortunately, several of them are corrupt as well, though nowhere near on the scale of many companies. The fact is for decades there has been a massive anti-union propaganda campaign to make them seem like the bad guys.

As for fair companies, if you simply look at firms like Jet Blue, steel company Nucor, small, usually family owned business like that one banker who just gave out millions to his employees based on years of service, there is ample evidence that mixing the accountability and pragmatism of for-profit capitalist entities with values such as compassion and respect for your workers, you can succeed to an incredible extent, though in some cases, perhaps not as quickly or to the extremes as firms that milk the life out of people. But over the long term, it can succeed, benefit communities, and as evidenced today, prosper through shocks that other firms who have to beg like little whiners for handouts can’t.

I don’t know much about the ceo’s of these large corporations but, on a smaller scale, I know that people in management and positions upwards make the amounts that they do partly because of the weights of the decisions that they have to make and the experience and knowledge that thso decisions entail. What I mean is that when they screw up, 50 -500 hundred people could lose their job. While joe factory worker doesn’t have to deal with any of that. Additionally, when it comes time to let someone go, for whatever reason, sometimes it is really unfair, It is one of the worst things that a person has to do. Stripping someone of their livelyhood. You have to pay someone well to do that.

Should someone make an outrageous amount of money, probably not, but more power to them. Should our government be giving out 100’s of billions of dollars to these companies. NO!!! What will that solve? Any bank that recieves a bailout should have to hire all new management.

As far as the car companies go, Why did any factory worker ever!!! make $20.00 an hour. Automotive unions are what’s crippling our automotive industry. Automotive COE’s are asking for money from their private jets, That’s a little excessive. They can’t stay competitive with foreign car companies. They are loosing money hand over fist because we can’t compete at $20.00/hour with 1-5 dollars per hour overseas. What happened to people feeling that they are lucky to have a job. That’s why we all buy japanese cars.

Well, I just hope that someday someone in our government will wake up and start fixing the problems with our economy instead of just dumping our tax dollars into the pockets of these jerks that put us here in the first place.